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2016 (6) TMI 1129 - HC - Income TaxInterest paid to members of a Co-operative Bank - whether added to tax or not? - TDS liability - Held that:- As decided in Commissioner of Income Tax and another vs. The Bagalkot District Central Co-operative Bank [2016 (7) TMI 748 - KARNATAKA HIGH COURT ] the Ministry of Finance, Government of India vide Circular No.19/2015 in F.No.142/14/2015- TPL, has held that the Co-operative Banks are not required to deduct tax at source on time deposits of its members paid or credited on or before 1.7.2015. Whether the gratuity payable to its employees is available for deduction? - Held that:- The counsel for the assessee would be quick to point out that even if it is not permissible to make a deduction, in such an event, on making payment as provided under Section 43-B (b), it would be permissible if the actual payment is made and these sections are mutually exclusive and therefore, the Karnataka Electricity Board case [1991 (6) TMI 19 - KARNATAKA High Court ] is no longer relevant, by virtue of the amendment to Section 40-A(7). Under Section 43-B, the assessee had not merely made a provision but payment was actually made and therefore, was entitled to deduction, would also answer this question as to whether the payment made towards a gratuity fund could be deducted. Whether interest receivable from non-performing as sets, bad and doubtful debts though the actual expression used is interest payable and not reflected in the profit and loss account, could be deducted? - Held that:- The mere nomenclature adopted with reference to the bad loans and advances receivable, would refer to all non-performing assets of any nature, of whatever category it was placed as a non-performing asset an d therefore, the decision of this court in Canfin Homes [2011 (8) TMI 178 - KARNATAKA HIGH COURT ] would squarely apply wherein held . Once a particular asset is shown to be a non-performing asset, then the assumption is it is not yielding any revenue. When it is not yielding any revenue, the question of showing that revenue and paying tax would not arise. As is clear from the policy guidelines issued by the National Housing Bank, the income from non-performing asset should be recognised only when it is actually received. That is what the Tribunal held in the instant case. Therefore, the contention of the Revenue that in respect of non- performing assets even though it does not yield any income as the assessee has adopted a mercantile system of accounting, he has to pay tax on the revenue which has accrued notionally is without any basis. In that view of the matter, the second substantial question framed is answered against, the Revenue and in favour of the assesse. Accordingly, the above question of law also stands answered.
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